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BREAKING: Bank Collapses. Feds cite Sen. Chuck Schumer as “immediate cause” of collapse

By: Erick Erickson (Diary)  |  July 11th, 2008 at 06:05 PM  | 

RESIZE: AAA

Federal regulators just seized and shut down IndyMac, a major mortgage specialist.

The Pasadena, Calif., thrift was one of the largest savings and loans in the country with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank and Trust Co., which failed in 1984 with $40 billion of assets.

IndyMac specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don’t fully document their incomes or assets. The company sold most of the loans it originated but continued to hold some on its books. As defaults piled up, IndyMac’s finances deteriorated.

The bank will be run by the Federal Deposit Insurance Corp., a federal regulator, and will reopen Monday.

Now the question is, did Senator Chuck Schumer cause IndyMac’s collapse? The Office of Thrift Supervision, that regulates entities like IndyMac, says “the immediate cause” of IndyMac’s collapse was Senator Chuck Schumer.

In a written statement, the Office of Thrift Supervision, which regulated IndyMac, said “the immediate cause” of the failure was statements made by Sen. Charles Schumer, a New York Democrat. Mr. Schumer in late June publicly raised concerns about the bank’s solvency.

“Although this institution was already in distress, I am troubled by any interference in the regulatory process,” said OTS Director John Reich.

This is huge — that a federal regulatory agency would precisely finger a United States Senator as being responsible for a present financial disaster. And why? Because Schumer demands camera time and soapboxes to keep his power. And this time, he stepped up too high.

Now taxpayers will foot Schumer’s bill.

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COMMENTS

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  • Flagstaff

    Schumer would commit an indictable offense.

    He would do the most beautiful perp mince imaginable.

  • Rod_Patrick

    Sen. Charles Schumer, a New York Democrat. Mr. Schumer in late June publicly raised concerns about the bank’s solvency.

    This is an outcome of a democrat’s misguided and foolish effort to violate the internal affairs of a private business operation.

    Why can’t democrats keep their dirty hands off the private sector? I smell some form of subtle extortion/covert corruption behind this fiasco. Somebody must be benefitting from this.

    Sorry if I am being so suspicious about it.

  • kyle8

    He has been trying to ruin American business and finance for years.

  • Old_Crow

    The Senator would appear to have a major conflict of interest in that the top 9 campaign contributors to his 2004 re-election campaign were investment banks according to the Center for Responsive Politics:
    Goldman Sachs $270,090; Citigroup Inc $241,100; JP Morgan Chase & Co $135,550; Credit Suisse First Boston $154,794; Morgan Stanley $194,000; Bear Stearns $140,900; Merrill Lynch $147,000; UBS Americas $139,750; Lehman Brothers $115,000; and Bank of America $71,600.

    So IndyMac didn’t pay up, so 3800 folks are out of a job.

  • Pentagon16

    It is not bad enough that in DC I bought a 1 bedroom condo that I could afford while all around me people were buying houses they could not afford. But now, THE TAXPAYERS get to bail out these morons, and we get to bail out the rich mortgage bankers and banks who made the speculative loans, and my taxes go to pay for those who were stupid and greedy and rich in the first place.

    And so now they get to do it to us AGAIN in a few years as they know the taxpayer will be forced to bail them out for the next quick buck scheme that fails! Is there anything more insane than this, and more infuriating for middle class taxpayers who play by the rules?!!

  • smagar

    I’m confident that Schumer is going to come out, guns blazing, to deny he should shoulder ANY blame over IndyMac’s failure.

    The MSM will parrot his arguments, raise virtually no challenge to them, and focus most of its coverage on what IndyMac did wrong and what the Bush Administration should have done to keep IndyMac solvent. THEN, it will drop the subject, having cemented in the mind of the average voter a perception that Schumer is being unfairly blamed for IndyMac’s problems.

    Schumer and the MSM are counting on the financial ignorance and short attention span of the average American voter.

    Recommend that Republicans use this opportunity to tarnish Schumer’s image.

    IndyMac is gone. What’s done is done. Instead, GOP and conservative opponents should talk loudly and often about why Schumer’s actions were reprehensible.

    Right now, few Americans know Chuck Schumer. Let’s use this opportunity to introduce Chuck Schumer to the American people, as a man willing to bring down a bank in order to elect more Democrats to the Senate. Then, let Chuck convince the American people otherwise.

    Note: we can’t count on GOP Senators (with, perhaps, the exception of Tom Coburn) taking Schumer on. Schumer has the power to bottle up anything the GOP wants to do in the Senate and the ruthlessness to do it. No, it will have to be people outside the Senate.

    Recommendations:
    - Larry Kudlow
    - Congressman John Campbell
    - Mitt Romney
    - Steve Forbes
    - Newt Gingrich
    - J.C. Watts

    When the OTS called out Chuck Schumer, they picked a fight. I hope they’re ready to fight.

  • Rod_Patrick

    When there’s smoke, there’s fire.

    Fed should dig further.

  • Rod_Patrick

    Of course he will say he warned the public about the impending collapse of an unstable bank. He’ll completely ignore the fact that his own actions lead to a great deal of that instability.

    By the way, I suspect that last week’s comments by the treasury sec and others aimed at dispelling the notion of being “too big to fail” was precisely because they knew this action was about to occur.

  • swift93

    You are taking a bank that was insolvent and trying to blame a politician who simply stated the reality of this credit mess. If this bank was solvent would he have issued a warning or is it better to keep everyone in the dark until the very end?

    Does OTS Director John Reich think he has carried out proper oversight? I suggest if he had, the bank wouldn’t have failed.

  • swift93

    You are taking a bank that was insolvent and trying to blame a politician who simply stated the reality of this credit mess. If this bank was solvent would he have issued a warning or is it better to keep everyone in the dark until the very end?

    Does OTS Director John Reich think he has carried out proper oversight? I suggest if he had, the bank wouldn’t have failed.

  • Neil_Stevens

    Ah yes, if only we had a strong state headed by a strong Leader of the People, he could keep corporations, the state, and everyone else in one happy, totalitarian unity.

  • Rod_Patrick

    Banks are fixed-income investors. They are public-held corporations and they put their money in stock market to earn interests: that’s how they earn their living and where they get the interest for your savings.

    Meaning, they are under the mercy of “good public standing”. Bersmirching the good name of such type of corporate entity will always lead to disaster.

    And the Senator hit the button: “solvency” is the heart of a stock-based corporation and when your heart is hit by huge bad cholesterol like Senator CHUCKIE, your will suffer death by heart attack.

    Because of the effort of the Bank and the Fed, it just didn’t die a sudden death.

    Finance 101: You call your external environment as “exogenous” variable, one that you don’t have full control. CHUCKIE’s bad mouth was an exogenous factor that the Thrift Bank couldn’t control.

  • Vegas_Rick

    Upchuck’s irresponsible comments caused the run.

  • FWGuy

    This bank was collapsing anyway, that is evident when it had to release its financial’s in February. The stock is has been in a free fall since then and Schummer did not cause that.

    Schummer is right in that there is has been way to little oversight and regulation of FDIC insured banks with their reckless conduct of making Alt-A and even worse sub-prime mortgages.

    Country Wide Mortgage sold for penny’s on the dollar, Bear-Sterns Investment Bank and IndyMac Bank collapse, these maybe just the tip of the iceberg if a mortgage rescue is not passed soon.

  • Whitfox

    destroys a bank, why don’t we set Schumer loose on all the Iranian banks? Just a little hot air would bring a quick end to a region threat!

    What really happened was that the bank was in a bad position, and this became publicly known. If this is a bad thing, we’d better close all the credit bureaus immediately. How dare they let lenders make informed decisions!

    The only thing to regret here is that we’re bailing out depositors in a company playing the real-estate bubble. I don’t see a good solution to that, though.

  • Rod_Patrick

    There are what we call “indvidual preferences” – economic motivations are not the only factors affecting one’s overall preference.

    A good question is this: “Who are putting their wealth and money in Iranian Banks?” I surmise they mostly Iranians or Moslem Arabians. That’s my 2cent-brain tells me.

    Now, on the internal factors such as the firm’s financial management expertise, history tells us that good corporate governance is not a guarantee. There are financial risks, i.e., factors and future events that cannot be fully ascertained.

    What does it mean? All firms are at risk! No one can really foretell the future. All firms are living in expectations and hopes. They should die in natural death: meaning, divestments should happen voluntarily depending on the performance over time. Investors and businessmen should therefore watch their business day in and day out.

    But if a Senator singles out your firm, expect that you will be in trouble immediately. You will suffer a “Sudden Death”, not a natural death.

    This is the reason why it is always best that the Government should stay away from the operations of normal business.

    You know, it is actually related to Gramm’s issue. The above is exactly the rationale of Gramm! You don’t shout to the rest of the World that you are dying! It won’t do you good. You won’t have enough time to regroup and realign your investments and resources to sustain your development as a nation.

    Look what happened when the MSM forced the financial market and the Fed to somehow support the idea of recession: All major stock indices plummeted in just a matter of weeks. And the effect is still continuing until now.

    Your President, GWH, an MSM-labeled moron, is wise enough to hold his resolve and maintain neutral statements with respect to the state of the economy. He is a real Pro-American leader by not giving away his country’s weaknesses to the competitors and enemies. You may call it “right of self-preservation”.